As Coinbase readies for a showdown against the U.S. SEC, a prominent crypto lawyer is backing the publicly traded company to secure victory.
San Francisco-headquartered cryptocurrency company Coinbase is set to file its final response in the initial phase of its legal battle with the United States Securities and Exchange Commission (SEC). Recall that the U.S. regulatory agency sued Coinbase in June, alleging a violation of securities laws concerning its trading platform and staking offerings.
While Coinbase has vehemently denied the allegations, the company has one more shot at getting the court to rule in its favor. Coinbase will most definitely file its motion-to-dismiss (MTD)order before a Tuesday deadline and has presented two significant arguments on why the court should dismiss the SEC’s case against the company.
Firstly, Coinbase has claimed that the assets being traded on its platform do not constitute securities as no underlying investment contracts are exchanged between trading parties. Secondly, Coinbase has brought up the Major Questions Doctrine, which by law means that a regulatory body does not have the right to regulate a novel industry for which Congress has yet to authorize it.
In addition, the Biden administration in 2022 urged Congress to review the risks and benefits associated with cryptocurrencies and possibly regulate the space. Coinbase will argue that the presidential move shows that crypto technology meets the Major Questions Doctrine and that the SEC does not have Congressional backing to regulate the industry.
Coinbase Motion to Dismiss “Has Teeth to It,” Says Crypto Lawyer
Crypto-focused Attorney John Deaton has weighed in on Coinbase’s recent motions and argued in a recent update that the court has a high chance of ruling in favor of the crypto company. Specifically, Attorney Deaton noted that District Court Judge Katherine Polk Failla, who presides over the matter, might rule that the SEC’s application of the Howey Test does not include secondary sales such as those on Coinbase’s trading platform.
This @coinbase Motion to Dismiss has real teeth to it. Usually, I would argue a MTD at this stage has less than a 5% chance at success. https://t.co/hj04KEsWLr
— John E Deaton (@JohnEDeaton1) October 23, 2023
Such an outcome would not be far-fetched given that a fellow District Court Judge, Analisa Torres, ruled similarly in Ripple’s case against the SEC. Coinbase had earlier indicated that it would leverage the Ripple ruling in its fight with the SEC and look all but set to do so.
Citing his experience with navigating the complex law against securities, Attorney Deaton noted that there has been no case in the past 80 years where a court found that a secondary exchange of assets constituted a securities transaction.
However, the experienced Attorney also mentioned that Coinbase might have a slightly more difficult chance of winning the SEC’s argument that its staking products violated securities laws. Yet, he argued that even a partial victory for Coinbase would mean “Game Over” for the U.S. SEC Chair Gary Gensler, who has consistently argued that nearly all cryptocurrencies are securities.
But if Coinbase wins a split decision as I’ve articulated, it will be GAME OVER for @GaryGensler. Judge Failla granting @coinbase’s MTD (even partially) is the only thing I see causing a pivot by Gensler & @ewarren.
— John E Deaton (@JohnEDeaton1) October 23, 2023
Attorney John Deaton then admitted that he would not be surprised if the SEC suffered such a huge loss based on Coinbase’s latest arguments. The District Court Judge is expected to respond to Coinbase’s motion to dismiss in the coming weeks and may invite both parties to the court to hear the arguments in person before making a ruling. In either case, Coinbase remains firmly in the mix in a lawsuit that could potentially define the future of digital assets in the United States.
